Atlantica Yield (AY) kicked its growth engine into high gear during the fourth quarter, which enabled it to deliver results within its full-year forecast. Its solid performance gave it the power to boost its dividend by 11% over the past year, pushing the yield up to an attractive 5.7%.
More growth appears to be in on the way, thanks to the renewable energy company's successes last year and its growing pipeline of opportunities. Its high-yielding payout appears poised to continue heading higher in the future.
A look at Atlantica Yield's fourth-quarter results
|
Metric |
Q4 2019 |
Q4 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Adjusted EBITDA |
$163.4 million |
$144.3 million |
13.3% |
|
Cash available for distribution (CAFD) |
$50.0 million |
$39.1 million |
28.1% |
Data source: Atlantica Yield.
Atlantica Yield's EBITDA jumped 13% during the fourth quarter, pushing the full-year total to $821.6 million. That was 3.2% above 2018's level and within its $820 million-$870 million guidance range. Meanwhile, CAFD surged 28%, pushing its full-year tally to $190.3 million. That was about 11% above 2018's level and at the mid-point of its $180 million-to-$200 million guidance range.
All four of the company's sustainable infrastructure segments contributed to its growth during the fourth quarter:
Data source: Atlantica Yield. Chart by the author.
Earnings in the renewable segment rose 12% year over year, thanks to higher production that resulted from strong resource conditions. However, EBITDA in this business group declined by 9% for the full year, largely because of lower energy generation in the United States.
The company's efficient natural gas segment grew its earnings by nearly 22% during the fourth quarter. The main driver was the acquisition of an interest in a natural gas power plant in Mexico. That new addition helped fuel a 16% year-over-year increase in earnings from this business division.
Earnings from electric transmission lines rose 14% during the fourth quarter. The main power source was an investment to acquire two operating transmission lines in Peru last year. That helped boost this segment's full-year results by 9%.
Finally, the water segment's earnings rose 8% year over year, thanks to high availability levels at its water desalinization assets in Algeria. For the full year, EBITDA from water infrastructure rose by about 3%, mainly because of high availability.
Image source: Getty Images.
A look at what's ahead for Atlantica Yield
Atlantica Yield expects its adjusted EBITDA to be in the range of $820 million to $870 million this year. At the midpoint, that outlook implies a 3% increase from 2019's level. Meanwhile, the sustainable infrastructure company expects CAFD to be between $200 million and $225 million, which suggests roughly 12% growth at the midpoint. Powering that forecast is the continued benefit from investments it made last year, its cost-cutting initiatives, and the refinancing of higher-cost debt.
There's lots of upside potential to that forecast, given the investment opportunities Atlantica Yield has ahead of it. The company has the option to acquire its partners' interest in Solana -- a solar energy generating facility in the United States. It has until the end of April to exercise that option, which would cost $300 million and has a CAFD yield in the double digits.
On top of that transaction, the company has identified several investment opportunities across all its business sectors. In its view, it should be able to invest $200 million to $300 million per year into additional sustainable infrastructure opportunities.
Atlantica Yield has ample financial flexibility to make these investments. thanks to its conservative corporate debt-to-CAFD ratio of 2.9. It also has lots of access to capital, including $400 million of corporate liquidity. It's working to boost that number by refinancing some existing debt. On top of that, it has a strategic relationship with Algonquin Power & Utilities (AQN 1.73%). In addition to providing acquisition opportunities, Algonquin Power & Utilities has also pledged its financial support through co-investments and direct stock purchases to help Atlantica fund new investments.
A sustainable yield with upside potential
Atlantica Yield expects its cash flow to grow by double digits again this year, powered by its success in making acquisitions and reducing costs in 2019. There's upside to that plan if it completes additional investments, such as acquiring its partner's interest in Solana. The company appears to have plenty of power to continue increasing its high-yielding dividend.
